Menu

Month: October 2010

Another informative post my friends at KCM….

Can Rates Go Down Any More?

by DEAN HARTMAN on OCTOBER 21, 2010 ·

I agree with Dean that rates will go down for a time, maybe six months, but the reason is to get American products to look cheaper. Congress is through helping the housing market, and in some ways I believe it should not be artificially propped up. Eventually rates will rise because a sustained period of a weak dollar will not help the overall economy.

It appears they CAN and that they WILL. The buzzwords today are Quantitative Easing. It is another of the weapons the Fed has at its disposal to impact the economy, as a whole, and interest rates in particular.

Let me explain. In so far as the Fed has already lowered the rates they charge to lending institutions as much as they can, and they still see a sluggish economy with weak employment numbers and growth, the Fed appears ready to enter a second round of Quantitative Easing (QE). QE is when the Fed begins to buy Mortgage Backed Securities in earnest. They do that by paying more than the market price for MBSs; therefore, pushing interest rates lower.

But why do it? I mean rates are historically low already. Is lowering rates another quarter or half percent going to get someone to buy a house that hasn’t already gotten off the fence? Maybe, but I can’t see the number of people deciding to buy at 4% rates being that significant as compared to those looking to buy at 4.5%. There HAS to be other reasons. Maybe….

The Fed realizes that lower rates will stabilize home prices. Lower rates mean borrowers can borrow more money based on their income, enabling them to pay more for a home which can slow the decline of prices, stabilize prices, and in a few areas even raise prices of homes.

The Fed needs to look like they are doing SOMETHING to energize the economy or get consumer confidence turned around.

The Fed has an agenda other than lower mortgage rates. Maybe the Fed is using the lowering of rates, in an effort to devalue the US Dollar abroad. By lowering the value of the dollar, our products become a better bargain to buyers overseas. So, maybe, just maybe, this is actually an attempt to kick start the economy. If we sell more products overseas, we need to produce more products, hire more employees to make, sell, and distribute those products. Can I smell job growth through QE?

Understand that a weakened dollar will eventually force rates to move up (to re- strengthen the dollar); so, there is going to be a window of even more incredible mortgage rates, but, the window will need to be carefully watched because it can’t be left open forever.

There is no history we can point to predict if QE can or will work. Nor is there any real indication of the level of aggressiveness the Fed will take in this area. (Listen to the rhetoric between now and next week’s release of the Fed’s Beige Book as hints.) It may just be another shot in the dark, but personally, I am in favor of ideas that promote job growth more than government hand outs and bail outs.

Great Post from KCM Crew I’d like to share….5 Reasons You Should Sell Your House TODAY!Selling your house in today’s market can be extremely difficult. It is for that reason that every seller should take advantage of each and every opportunity that appears. Each fall, such an opportunity presents itself. This fall, that opportunity may be just too good to pass up.

Below are five reasons you should consider when pricing your house to sell in the next 90 days. Meet with your real estate agent and mortgage professional today and see whether it is the right move for you and your family.

We all realize that buyers are not quick to pull the trigger on the purchase of a home today. There is no sense of urgency with the supply of eligible properties at all time highs. However, at this time of year, the ‘lookers’ are at the stores doing their holiday shopping. The home buyers left in the market are serious and are more apt to make a purchasing decision. Less showings – but to more motivated purchasers.

2. If you are moving up, you can save thousands.

The Chicago Tribune stated in an article last week that sellers who want to ‘trade up’ should act now:

It could be a bigger house, different neighborhood or a better school district, but it comes with a higher price tag. Do the math; this might be the right time.

A home that was once worth $300,000 may now be worth $240,000 in a market where prices have fallen 20 percent. Wow, you think, the seller is taking a bath. But that seller may also be a prospective buyer who wants a house that once was valued at $400,000. With an equivalent market drop and a realistic listing price, that house may now sell for $320,000. So, in effect, the person is losing $60,000 on the sale of one home but coming out ahead $20,000 on the purchase of another.

Keep in mind the spread may be even greater. There’s a smaller pool of potential buyers for more expensive homes, so sellers may be more willing to cut their price to get a deal done.

3. Interest rates just fell again – to 4.19%.

Four years ago, the monthly payment on a $300,000 house with 20 percent down and a mortgage rate of about 6.6 percent was $1,533. Today that $300,000 house would sell for $213,000 and a 30-year fixed-rate mortgage with 20 percent down would carry a rate of about 4.2 percent and a monthly payment of $833 … housing has perhaps never been a better bargain.

4. You beat the rush of inventory that is coming next year.

Every year there is an increase of inventory which comes to market from January through April as homeowners put their houses up for sale in preparation for the spring market. As an example, here is the number of listings available for sale in each of those months in 2010.

January – 3,277,000

February – 3,531,000

March – 3,626,000

April – 4,029,000

You won’t have to worry about this increasing competition if you sell now.

5. You have less ‘discounted’ inventory with which to compete.

This year, sellers of non-distressed properties have been given an early holiday present. With banks declaring a suspension on the sale of many distressed properties (foreclosures), there has been a large supply of discounted properties removed from competition. No one knows how long this self imposed moratorium will last. However, while it does, every homeowner has a better chance of selling their property.

Bottom Line

If you are looking to sell in the near future, there may not be a more opportune time than this fall. Serious buyers, great move-up deals and less competition from foreclosures creates the perfect selling situation. Don’t miss it!

$150K-199K 1 home sold at 37% of original listing price of $528,000 (OLP original list price)

$300K-349K 2 homes sold at 105% OLP

$350K-399K 4 homes sold at 92% OLP

$400K-449K 9 homes sold at 96% OLP

$450K-$499K 7 homes sold at 95% OLP

$500K-599K 41 homes sold at 95% OLP

$600K-699K 20 homes sold at 94% OLP

$700K-799K- 27 homes sold at 95% OLP

$800-899K 17 homes sold at 94% OLP

$900K-999K 16 homes sold at 93% of asking price

$1000M-1.499M 41 homes sold at 92% of asking price

$1.500M-1.999M 9 homes sold at 90% of asking price

$2.000M-2.499M 3 homes sold at 87% of asking price

$3.000M-3.999M 2 homes sold at 70% asking price

2010

$250K-299K 1 home sold at 89% of OLP

$300K-349K 1 home sold at 90% of OLP

$350K-399K 2 homes sold at 82% of OLP

$400K-449K 6 homes sold at 97% of OLP

$450K-499K 4 homes sold at 95% of OLP

$500K- 599K 14 homes sold at 93% of OLP decrease of 27 homes from 2009 or 65% fewer

$600K-699K 17 homes sold at 97% of OLP decrease of 3 homes

$700K-799K 25 homes sold at 95% of OLP decrease of 2 homes

$800K-899K 15 homes sold at 94% of OLP decrease of 2

$900K-999K 14 homes sold at 95% of OLP decrease of 2 homes

$1000M-1.499M 31 homes sold at 91% of OLP decrease of 10 homes or 20% fewer

$1.500M-1.999M 12 homes sold at 93% of OLP increase of 3 homes

$2,000M-2.499M 2 homes sold at 94% of OLP decrease of 2 homes or 50%

$2.500M-2.999M 2 homes sold at 83% of OLP increase of 100%

$3.000M-3.999M 1 home sold at 95% of OLP

So what do these numbers mean? The $500,000 to $600,000 was most probably a direct result of expiring tax credits, therefore a 65% drop in volume. The very high-end and the low-end suffer from the most unrealistic sellers; hence a 70% OLP for the one house sold at $195,000 originally listed at $528,000, with 82 days on the market. The one high-end house averaged 12 days on the market, and sold for 95% of asking, ( realistic seller) while 2009 2 houses sold at 70% of original list price of $4,998,500 and sale price of $3,622,500 and stayed on the market for an average of 456 days. I foresee a slight decrease in volume for the rest of 2010 but prices remaining steady. Inventory is building, about 20% in the past month, I have also noticed an uptick in price changes, which will be necessary to get stagnant inventory moving. In the meantime, we will wait and see whether patience rewards the buyer or the seller. My money is on the buyer.

On another matter, I am starting to sound like a broken record, pricing matters and buyers should not be relying on the SELLER’S agent to buy a property. The idea that you are going to receive a “discount” because you don’t have a broker is ludicrous. The contract is between the seller and the real estate firm the agent works for, not the individual agent. The agent cannot renegotiate the commission for his or her company. Is there a little leeway– yes, but not enough to go in blind, and I am amazed at how naive some buyers continue to be.